By Alison Sider
When the price of crude fell off a cliff, oil producers were
supposed to topple, too. Companies that own pipelines, storage
terminals and oil refineries have been waiting to catch them, or at
least some of their assets, with outstretched arms and open
wallets.
So far, it hasn't worked out that way.
"There doesn't seem to be a lot of distress prices out there
right now," Phillips 66 Chief Executive Greg Garland said during a
conference call Thursday. "We might say we were a little surprised
by that as we think that through, but we just don't see any
compelling cases out there today."
Companies that develop oil and natural gas fields often also own
infrastructure, such as pipelines that hook wells up to larger
transportation networks. Many energy mavens anticipated that these
types of assets, which broadly fall into a category known in the
industry as midstream, would be the first to be sold as oil
producers scrambled to raise cash.
"When we saw the crude prices fall, we thought that could
potentially put more midstream assets on the markets," said Pam
Beall, a senior vice president at Marathon Petroleum Corp. "We've
seen a little bit of that, but not a lot."
Refiners have latched on to energy transportation, which brings
in steady, predictable fees, as a way to expand their businesses
without increasing their exposure to volatile fuel prices. In
recent years, Marathon, Phillips 66, PBF Energy Inc., Valero Energy
Corp and other refinery operators have launched tax-advantaged
master limited partnerships to manage their expanding networks of
pipelines, fuel storage tanks, and oil-train terminals.
These partnerships rely on acquisitions to keep paying out cash
flow to investors. Many of those deals stay in the family.
Marathon, for example, announced Thursday that it plans to sell its
marine operations to its partnership, MPLX. But companies like
Marathon have also said they want their partnerships to get big
enough to buy businesses from other companies.
So far, however, few energy companies have had to part with
their pipelines, turning instead to the equity and debt markets to
raise money. Companies like Whiting Petroleum, Antero Resources
Corp. and Energy XXI Ltd. have issued additional shares and notes
in recent months.
That has prompted some grumbling from companies that were hoping
to go on a shopping spree, including pipeline giant Kinder Morgan
Inc.
Chief Executive Richard Kinder said recently that Wall Street is
"backing companies that otherwise might be more in need of selling
midstream assets that we would be interested in."
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